Finance and Economic

Polish central bank Governor Marek Belka said inflation in the eastern European country will peak within two months and a surprise interest rate increase in May isn’t a start of “a new trajectory” in monetary tightening.

“We are really very close to the peak” of consumer-price growth, Belka said in an interview in the Kazakh capital Astana today. The rate increase wasn’t to signal “a new trajectory of interest rate increases. It’s simply that we want to implement our strategy faster.”

The central bank unexpectedly raised its benchmark seven- day rate by a quarter-point to 4.25 percent on May 11. The bank sought to pre-empt pressure on prices as consumer spending is picking up. The inflation rate rose to a 2 1/2-year high of 4.5 percent last month.

Wage growth is accelerating in Poland, the European Union’s largest eastern member which escaped a recession altogether during the credit crisis. The Polish central bank raised borrowing costs three times since January as policy makers across the globe struggle to curb inflation.

The rate move probably changed perceptions of how fast prices are going to rise and will “moderate” economic growth in Poland, Belka said cash advance. Imported inflation is also eroding the purchasing power of consumers, he said.

‘Hysteria Is Over’

Following the rate increase “we are observing a certain attenuation of inflationary expectations.” Belka said. “The hysteria is over.”

The inflation rate may drop “close” to the central bank’s target of 2.5 percent late next year, Belka said. The rate has been above the bank’s goal for seven months.

Government efforts to limit public spending may help combat inflation in the country, he said.

Even so, Belka said he has “some doubts” the government will be able to reduce the budget deficit to 2.9 percent of gross domestic product as planned next year.

The central bank took the government’s pledge “seriously” that it will implement “additional measures if necessary” to cap expenditures, he said.

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ST. CHARLES

Wholesale costs in the U.S. rose more than forecast in April, led by higher prices for food and fuel.

The 0.8 percent increase in the producer-price index compares with the 0.6 percent median estimate of economists surveyed by Bloomberg News, Labor Department figures showed today in Washington. The core measure, which excludes volatile food and energy costs, climbed 0.3 percent, more than projected.

Rising costs may lead businesses such as Whole Foods Market Inc. (WFMI) to increase prices, boosting the cost of living for American consumers. At the same time, Federal Reserve Chairman Ben S. Bernanke said he expects commodity prices to moderate.

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The Bank of England won’t raise its interest rate until 2013 as the economic recovery’s momentum stays “pretty weak,” Deloitte & Touche LLP said.

“The underlying momentum of the economic recovery looks pretty weak,” Deloitte’s economic adviser Roger Bootle, a former adviser to the U.K. Treasury, said in a report today. “My central forecast is still that rates remain on hold throughout this year and next.”

Bank of England policy makers have split four ways on whether to raise interest rates or add stimulus to aid the recovery at a time when inflation remains at twice the Monetary Policy Committee’s 2 percent target. Britain’s economy grew 0.5 percent in the first quarter, just enough to offset the contraction in the final three months of 2010.

“It is not out of the question that the MPC will eventually need to give more support to the economy,” Bootle said. “But additional asset purchases, if they do come, are perhaps unlikely until 2012.”

Bootle expects gross domestic product to increase 1.5 percent this year and next, according to the report. Inflation will average 4.4 percent this year before falling to 1.8 percent in 2012.

The Bank of England kept its benchmark rate unchanged at 0.5 percent last month. The rate will rise by 25 basis points by November, according to forward contracts on the sterling overnight interbank average, or Sonia, compiled by Tullett Prebon Ltd.

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Aetna says its first-quarter profit rose 4 percent as claims left over from the previous quarter came in lower than the health insurer expected. But it says revenue and enrollment dropped.

The insurer also says it has agreed to buy Prodigy Health Group, a large administrator of self-funded health care plans, for about $600 million. New York-based Prodigy operates in 15 states.

The Hartford, Conn., insurer said Thursday its net income rose to $586 million, or $1.50 per share, in the three months that ended March 31 same day payday loans. That’s up from $562.6 million, or $1.28 per share, a year ago. Revenue fell 3 percent to $8.38 billion, and enrollment dropped 5 percent.

Analyst forecast lower behind 96 cents per share on $8.32 billion in revenue.

Aetna is the third largest commercial health insurer behind WellPoint and UnitedHealth.

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Confidence among U.S. consumers increased more than forecast in April, signaling the improving labor market is helping Americans weather rising fuel costs.

The Conference Board’s confidence index rose to 65.4 from a revised 63.8 reading in March, figures from the New York-based private research group showed today. The median forecast of economists surveyed by Bloomberg News called projected an advance to 64.5.

Six straight months of job growth along with joblessness at a two-year low in March are helping sustain consumer purchases, which account for about 70 percent of the economy. At the same time, bigger gains in sentiment may be difficult as households spend more for food and gasoline, which is at the highest level in almost three years.

“Confidence is picking up on the back of an improving labor market and rising stock prices, which are offsetting higher gasoline costs,” said Sal Guatieri, a senior economist at BMO Capital Markets Inc. in Toronto. “Consumers will have both the confidence and the income to keep spending.”

Stocks held earlier gains after the report on optimism over improving corporate earnings. The Standard & Poor’s 500 Index rose 0.4 percent to 1,340.8 at 10:17 a.m. in New York. Treasury securities rose, sending the yield on the benchmark 10-year note down to 3.34 percent from 3.37 percent late yesterday.

Home Prices

Another report today showed residential real estate prices dropped in February by the most in more than a year, a sign the housing market is struggling to stabilize.

The S&P/Case-Shiller index of property values in 20 cities fell 3.3 percent from February 2010, the biggest year-over-year decrease since November 2009.

Estimates for consumer confidence ranged from 57 to 68 in the Bloomberg survey of 69 economists. The measure averaged 97 during the expansion that ended in December 2007.

The group’s measure of present conditions increased to 39.6, the highest since November 2008, from 37.5 a month earlier. The gauge of expectations for the next six months rose to 82.6 from 81.3.

The share of consumers who said jobs are currently plentiful rose to 5.2 percent from 4.6 percent. Those who said jobs are hard to get decreased to 41.8 percent, the fewest since January 2009, from 44.4 percent.

Jobs Outlook

The outlook was less rosy. The percent of respondents expecting more jobs to become available in the next six months decreased to 17 cash advance today.5 from 19.6 the previous month. The share expecting incomes to rise over the next six months improved to 16.7 percent from 15.2 percent.

The report contained one positive bit of news for the housing market, which has lagged behind other parts of the economy since the recession ended in June 2009. The share of Americans planning to buy a house over the next six months increased to 5.5 percent, matching the record high reached in January 1978. Data go back to 1964.

Intentions to purchase automobiles and appliances also improved.

Fuel costs may be preventing bigger gains in confidence. The average price of regular fuel climbed to $3.87 a gallon yesterday, the highest level since August 2008, according to AAA, the nation’s biggest motoring organization.

Confidence ‘Fragile’

“The economic climate is still less than ideal, from a slow and uneven recovery to significantly rising commodity costs and fragile consumer confidence,” Jim Skinner, chief executive officer of McDonald’s Corp. (MCD), said on a conference call with analysts on April 21.

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The OECD is recommending that Japan as much as quadruple its sales tax rate to deal with a crushing deficit that’s bound to grow as it spends on reconstruction from last month’s earthquake and tsunami.

Economists in the group of the world’s wealthiest countries said in a report released Thursday that the country should boost the sales tax, now 5 percent, to as high as 20 percent while cutting corporate taxes.

OECD Secretary-General Angel Gurria says Japan has to perform a balancing act as it finances reconstruction following the March 11 disasters while sustaining its economic recovery and cutting debt.

The Organization for Economic Cooperation and Development also recommends education system changes, freer trade with other countries and other reforms.

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Bank of England official Andrew Haldane said financial stability may be threatened by capital flows from developed countries that are too quick and substantial for emerging nations to absorb.

“The global flow of funds could become an increasingly powerful generator of global financial instabilities,” Haldane, the bank’s executive director for financial stability, said in a speech delivered today in Bretton Woods, New Hampshire. “Pressures could mount on policy makers to protect against the rising tide of capital flow-induced instability, including through capital restrictions and macro-prudential measures.”

Haldane said a “big fish small pond” problem arises when investors in developed countries shift funds to smaller economies and less-developed markets. To illustrate the scale, he said a drop of 0.1 in an index of investment “home bias” for advanced countries in 2007 would have reallocated about $4.5 trillion to foreign markets. That compares with a market capitalization of $6.8 trillion of emerging economies among the Group of 20 nations.

This dynamic could be seen last year, when investors abandoned developed markets for faster-growing emerging economies no credit check payday loans. The resulting equity inflows “were large” compared with the size of the markets, and officials responded with capital-flow restrictions and other measures, Haldane said.

‘Home Bias’

The trend may increase as developed-nation investors increasingly reduce their “home bias,” while advances in the depth of financial markets in emerging economies prove “rather gradual.” Haldane’s projections show the average capital inflows, relative to market capitalization, to the G-20 emerging economies will reach 8 percent a year through 2050, more than the peak seen recently, including 2010.

“If capital markets operated efficiently, these portfolio flows need not cause waves in emerging credit and asset markets,” he said. “In practice, frictions in the functioning of these markets mean that asset-market spillovers seem very likely to persist.”

“In other words, the splashes from the big fish risk causing waves every bit as great, and potentially greater, than those seen recently,” he said.

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Workers stopped a highly radioactive leak into the Pacific off Japan’s flooded nuclear complex Wednesday, but with the plant far from stabilized, engineers prepared an injection of nitrogen to deter any new hydrogen explosions.

Nitrogen can prevent highly combustible hydrogen from exploding _ as it did three times at the compound in the early days of the crisis, set in motion March 11 when cooling systems were crippled by Japan’s 9.0-magnitude earthquake and tsunami.

Nuclear officials said there was no immediate threat of more explosions, and but the nitrogen plans were an indication of the serious remaining challenges in stabilizing reactors at the Fukushima Dai-ichi plant and halting the coastal radiation leaks that have cast a shadow on northeastern Japanese fisheries.

Nitrogen normally is present inside the containment that surrounds the reactor core. Technicians will start pumping more in as early as Wednesday evening, said Junichi Matsumoto, a spokesman for the plant operator. They will start with Unit 1, where pressure and temperatures are highest.

“The nitrogen injection is being considered a precaution,” said spokesman Hidehiko Nishiyama of Japan’s Nuclear and Industrial Safety Agency.

Workers have suffered near-daily setbacks in their race to cool the plant’s reactors since they were slammed by the tsunami, which also destroyed hundreds of miles of coastline and killed as many as 25,000 people.

But there was a rare bit of good news Wednesday when workers finally halted a leak of highly contaminated water into the ocean that had raised concerns about the safety of seafood.

Officials had said the runoff would quickly dissipate in the vast Pacific, but the mere suggestion that fish from the country that gave the world sushi could be at any risk stirred worries throughout the fishing industry.

In the coastal town of Ofunato, Takeyoshi Chiba, who runs the town’s wholesale market, is warily watching the developments at the plant, about 120 miles (200 kilometers) down the coast.

“There is a chance that the water from Fukushima will come here,” he said, explaining that fishermen in the area still haven’t managed to get out to sea again, after the tsunami destroyed nearly all of their boats pay day loan lenders. “If Tokyo decides to ban purchases from here, we’re out of business.”

After radiation in waters near the plant was measured at several million times the legal limit and elevated levels were found in some fish, the government on Monday set its first standard on acceptable levels of radiation in seafood.

“Right now, just because the leak has stopped, we are not relieved yet,” Chief Cabinet Secretary Yukio Edano said. “We are checking whether the leak has completely stopped, or whether there may be other leaks.”

Stemming the leak of highly radioactive water is progress because it limits the contamination of the surrounding environment, but now workers must turn their focus to their primary goal: cooling the reactors and bringing them under control.

That mission has been hampered by highly contaminated water that is pooling throughout the plant, making it difficult or impossible to access some areas.

The pools have been an unavoidable side-effect of a makeshift cooling method: pumping water into the reactors and letting it gush out wherever it can. That messy process will continue until they can restore normal cooling systems _ which recycle water, rather than spitting it out.

Getting rid of that pooling water has vexed TEPCO; it has ordered a floating storage facility and is also requesting a vessel that decontaminates water from Russia.

With those solutions not available for some time, the utility decided to take a drastic measure Monday: pumping 3 million gallons of less contaminated water into the sea to make room in a warehouse for the more highly radioactive water.

The warehouse is almost empty, and officials planned to check it thoroughly for any cracks before starting to fill it up again. The building is not meant to hold water, but it also hasn’t leaked yet, so engineers decided it could make a safe receptacle.

“We must carefully check and repair the facility to make the water will not leak out and affect the environment,” Nishiyama said.

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Moody’s downgraded Portugal’s debt rating for the second time in less than a month Tuesday and warned that the debt-laden euro country may suffer another cut soon because of heightened political, budgetary and economic uncertainties.

The agency said it has cut its rating on Portugal’s bonds by one notch to Baa1 from A3 and placed the rating on review for another downgrade. If Portugal’s debt rating is cut by a further three notches to Ba1, then its bonds would be considered junk.

Moody’s said the range of difficulties, including the upcoming general election on June 5, increase the risk that Portugal will be unable to achieve the outgoing government’s ambitious deficit reduction targets over the coming three years and put the public finances into shape.

Moody’s also said the recent agreement to replace the current bailout fund with the European Stability Mechanism from 2013 also acted as a trigger for the downgrade as it contemplates the possibility of a debt restructuring within the euro area.

Though the election following last month’s resignation of the previous government complicates how Portugal can tap the EU’s current bailout fund, Moody’s reckons other countries in the eurozone would provide Portugal with help if required in the interim period.

However, once the election is out of the way, Moody’s said it expects the new government will “likely approach the facility as a matter of urgency faxless cash advance.”

Approaching its partners may become inevitable if Portugal’s ability to tap bond market investors dries up. The country faces a couple of key tests over the coming months. As well as having to repay a euro4.5 billion loan in April, it has an almost euro5 billion bond repayment two months later.

Moody’s said it’s “very unlikely” that the long-term debt markets will reopen to the Portuguese government or to the Portuguese banks to any meaningful extent until the government can take action to dispel doubts over its commitment and ability to implement its adjustment program.

The downgrade further illustrates the difficulties Portugal is facing if it is to avoid joining Greece and Ireland in seeking a financial rescue package. With the country’s borrowing costs seemingly hitting a record euro-era high on a daily basis, investors think it’s becoming increasingly unlikely that Portugal will be able to deal with its problems on its own.

By early morning, the yield on Portugal’s ten-year bonds were up a further 0.04 percentage point to a prohibitive 8.63 percent.

Moody’s said it believes that the government’s current cost of funding is “nearing a level that is unsustainable, even in the short-term.”

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